Beiber's reps claim the game is defaming his image. The company that made the game is suing back at Beiber saying that it's infringing on their first amendment rights. They aren't shy to admitting that Beibermania inspired the game and that it acts as a parody of his real life. Because they are not directly using his name or image, they feel that they have the right to distribute the game as they please. If it were a literal copy/paste of his name and image, then it would be a different story.

RC3 (the company that made the game) is looking for protection from the first amendment in a court ruling. They make a sound claim. It has already been ruled in the past that video games be treated with the same artistic freedom as movies, paintings, television, etc. Even with one as lame of a concept as Beiber being a Beaver. More then likely, the courts will side with the game. If they don't, expect a huge backlash from "celebrities". Beiber could easily claim that RC3 is making a profit off his image and could go after them for more money.

Worse comes to worse, I bet the game got a ton more downloads after the lawsuit came to light.